Lessons From the Real World of RFID
By George Anderson
A report on the InformationWeek Web site says that, even though the application of radio-frequency identification (RFID) technology has been limited in its use, “companies such as Gillette, Levi Strauss, and Wal-Mart are getting data they’ve never had about where goods get stalled on the way to shoppers.”
Simon Langford, manager of global RFID strategy for Wal-Mart, spoke to attendees at the Retail Systems show this week about the retailer’s test of RFID. One vendor, said Mr. Langford, discovered that some shipments were being held up 24 hours longer than they thought at one point in the supply chain. “When they (suppliers) started seeing that data, and getting that visibility, there were some ‘Wows’ in there.”
According to Mr. Langford, RFID doesn’t have to be perfect to improve on the company’s current level of efficiency. Today, the retailer may know what the inventory is in each store but it doesn’t know where the product is in the store. “Today, without RFID, we don’t know what’s in the back room and what’s in the front of [customers’] hands,” he said. “RFID gives us that window.”
For years, manufacturers have questioned retailers’ execution of promotional programs at store-level. Gillette’s director of Auto-ID technology, Jamshed Dubash, said RFID and electronic product code data (EPC) has given the company insights into where opportunities for improvement exist.
In one case, Gillette tracked product and found that it had arrived prior to the start of a scheduled promotion. Stores that moved the promotional product onto store shelves before the event began had 48 percent higher average dollars per point of sale than those that moved product to the shelf after the promotion began. In addition to this finding, Mr. Dubash said Gillette discovered 38 percent of stores involved in the test did not execute properly.
Moderator’s Comment: What is the most important real world lesson being learned from the RFID tests being conducted in the field? How far away are suppliers
and retailers from going beyond testing to a full rollout of RFID technology? –
George Anderson – Moderator
I believe RFID will eventually change the supply chain system in ways that other inventory control systems cannot.
For example…
Inventory of large items can be stored locally using specialty retailers to house safety stock for their stores as well as other stores in the market. This makes inventory locally available to consumers and other retailers.
This can not be effectively accomplished with bar code technology because change in location requires almost flawless scanning to assure control among storage locations where there are not trained employees and well-designed systems.
With RFID, inventory in a retailer’s back room, cannot move through the door without automatic notification. This is just one example of how RFID challenges us to look at supply chain management with new thinking.
The RFID technology will be here to stay, so for those on the paranoia track, get over it. Retailers and Manufacturers can’t wait until they have anticipated every possible downfall, have a perfect template to analyze the data and have all the software and hardware issues figured out. They have done the pre-test work and identified the major initial hurdles.
Let it roll! Learning by doing is better than not doing anything at all. We have only reached the tip of the iceberg of what this technology will be able to provide, but we’ll never find the rest of the iceberg unless we start the downhill climb.
Let’s get a grip here! The physics doesn’t always work and the standards need adjustment. RFID readers don’t read interior cases (meaning you have to de-palletize at the DC); they don’t read well through all viscous liquids; they’re extremely temperature and humidity sensitive; they don’t read through steel (as in grocery shelving or warehouse racks); etc. etc. Also you have competing frequency issues. HF tags are now standard in libraries and are about to be adopted for tagging Class II narcotics because (while they have much shorter reading limitations) they give much more specific location information. As to Wal-Mart, somebody ought to take a look at the RFID-inspired collision issues they’re having in their DCs. And as for data, this is where the real nightmare begins. We haven’t thought through issues such as who owns the data or how to effectively process the mountains of data generated by RFID technology. There are miles to cross before we can make any reasonable assessment of RFID’s true impact or the real timeline for meaningful levels of implementation.
This is the key to driving this thing forward: “getting data they’ve never had about where goods get stalled on the way to shoppers.” The point is that people who have never had the information sometimes just don’t see what the big deal is, and why they would need it.
We find the same challenge on the retail floor in implementing RFID to track the movement of shoppers, instead of the merchandise (PathTracker.) There are some obvious parallels like “where PEOPLE get stalled,” but this is just the tip of the iceberg that we have been assessing for the past four years.
In a general way the approach, whether on the retail floor or in the back room, is to observe patterns in the flood of new data, new learning. Those patterns represent potential understanding, the “rules” formerly unknown, that can drive you to the front of the pack. The next step is to notice the exceptions to the patterns. Figuring out the exceptions to the rules makes you an expert. 🙂
The most important real world lesson is that you can’t succeed in implementing an industry standard technology by jamming it down people’s throats. The right way to do this is to START with very sound business cases for all the key constituents and to develop the standards to meet the requirements of the business cases. Isn’t this why adoption of the UPC over 25 years ago worked? Isn’t this why Data Synchronization is stalling out? And isn’t this why Ryan Matthews comments above are right on the mark?
I’m of two minds on this. The technology is here and, for the most part, ready to go. What’s needed most is clear thinking about appropriate and useful applications that will provide useful information. The article shows some ways in which RFID can already pay for itself.
The fly in the ointment is the emotional (and legitimate) resistance to the misuse of the technology. This could hold it up for an eternity.
Ultimately, there are so many good uses for the technology, I believe people will find appropriate uses, but they will need to tread sensitively and lightly.
As I’ve said a thousand times, RFID is ultimately just better, and will evenntually be the way everything is tracked.
That said, there is a lot of bogus-ness here. The fundamental problem with all these bullish observations regarding the insights from RFID is that there is no explanation as to why this data was not available before. I haven’t read this specific article yet, but I suspect that much of this magical insight could be obtained from POS data, use of bar coded with existing systems, a little more operational discipline, etc.
So, the question is whether to get the insight is worth this massive an on-going expense right now, or if there are expensive options. The VP of Logistics at Wegmans recently said his company is re-engineering processes and finding they can, right now, get lots of benefits and information without use of RFID, which they felt was not ready in terms of cost or performance.
Second, the problem is that many of these ‘learnings’ can be one time events. Once I have found some surprises in my supply chain, I can fix them. Do I need to continue to apply expensive tags? Or now, this would almost argue for either periodic use of RFID, or use of RFID on only a portion of goods sent to find the surprises without the continuing cost of tagging all products – especially at these costs.
If, as the article apparently said, perfect read rates are not required for the insight, doesn’t it then follow that perhaps not all cartons need to be tagged for the insight either?
But the evangelists will not address these issues.
I couldn’t disagree more with Mr Howatt. RFID is not proven technology and we are a long way from knowing that it’s here to stay. The old “don’t you want progress?” canard always gets played when sound analysis isn’t supporting an initiative. So, people shouldn’t get over it as he suggests. They should resist adopting technology for technology’s sake and stick to making investments where they can expect an appropriate ROI. There is such a thing as learning through testing in order to reduce risk. It’s entirely possible that RFID will end up on the same scrap heap as CPFR, Scan-based trading, consortium exchanges, internet grocers, vendor managed replenishment, Data Sync and the many other “big ideas” that were going to transform the industry but have found very limited practice in the real world.
Recent tests at pilot installations at Wal-Mart and DOD have proven that RFID does not have any advantage over Barcode. Since it is vastly more expensive, it is bound to be a failure.